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FCC Back in Business, Targets Cell Phones

Don’t look now, but the FCC is back in business. For some nine months the Federal Communications Commission had been operating with no permanent chairman, and with 3 of its 5 commissioner seats vacant. Now, with the confirmation of new chairman Julius Genachowski, and new commissioners Mignon Clyburn and Meredith Attwell Baker, the agency is locked, loaded, and ready to go.

It’s first target? Not broadcasters, despite talk of a revived Fairness Doctrine, or Internet providers, despite talk of “net neutrality” regulation. Their turn may come soon, but first up will be the wireless industry. Specifically, in a meeting next week, the agency will launch investigations of wireless competition and billing practices, with an eye toward imposing new regulations on the sector.

The assault on wireless isn’t unexpected. Chairman Genachowski weeks ago started an investigation of exclusive marketing arrangements for the Apple’s iPhone, and Congress has been looking at rates for text-messaging. More broadly, there’s been talk of limits on spectrum auctions and imposition of wireless “net neutrality” regulation. In short, the industry has become a favorite political whipping boy.

And that is strange. The wireless industry is one of the most innovative and competitive on the globe. From bricks with antennas providing crackling voice connections to a select few 15 years ago, wireless devices now are small, ubiquitous, and do everything but wash your laundry. Competition is rampant –according the a report earlier this year by the FCC itself, 95 percent of Americans can choose from three or more competitors — 60 percent from four or more. Prices are dropping — from 10c per minute in 2003 to 6c in 2007, while the services offered are improving and multiplying. As a result, Americans are flocking to wireless — with 263 million subscribers in 2007 (up from 161 four years earlier), and using it more, with minutes of use increasing some 50 percent in four years. The US now leads the world in mobile usage, while costs are lower than in Europe or Japan.

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With this kind of story to tell, why are the mobile operators political targets? In a sense, they are victims of their own sucess. While consumers a decade ago were awed by the new gizmos in their hands, some today have come to expect everything from wireless, and are frustrated with any limits (see, “iPhone to Slavery in 13 Days.”)

Policymakers are naturally tempted to play on these frustrations to gain political points. Ultimately, however, this will be a losing game. Despite the grumbling, Americans still don’t lump their wireless service together with the telephone and cable monopolies of old. There is no “Ma Spectrum,” and consumers know it. And when new federal rules put the brakes on innovation, the new villains may become regulators themselves.